COVID-19

Five months ago COVID-19 was just getting started. Fear was rampant. People and businesses made rushed decisions with long-term consequences. In the U.S. fewer than 10,000 people had died from the virus, yet fear was many more would die. 

Over concerns clients and readers (that is you my kind friends) would make poor financial decisions, I published an article encouraging caution and recommended people relax, breathe deeply and think before making a decision. By thinking before acting, I felt my people would be in a better position to make decisions that would serve them well. 

Then I watched my readers act and react on social media. The spread of COVID-19 should have run a chill down the spines of any normal human being. But social media does not bring out the “normal” in people. Some over-reacted with the attitude everyone should shelter in place forever. But as always happens, the disease became “normal” as we saw it every day. Before long people wanted to get out and act as if nothing was wrong or that the risk had ended. The middle, sensible, ground somehow lost out. 

It is sad the intelligent solutions lost out. Again, social media was rife with conspiracy theories, questionable remedies and outright lies. Social distancing, washing hands and masks are three simple things everyone can do to slow the spread of the virus until a vaccine can end its rein of terror.

Logic didn’t work 5 months ago, so now I have to get blunt. This is a financial blog so there is a reason for the focus on a medical issue. Your reaction to COVID-19 is a large part of the way you think. If you conduct stupid, risky behavior with your life, you probably do even worse when it comes to money. The best way for me to convey this message is with the good cop/bad cop routine. 

There are two parts to this post. Part 1 is a mild comedy sketch of the facts. In Part 2 we will put it together and pull out meaningful and valuable data you can use. This value will increase your wealth and allow you to live long enough to enjoy it. Remember, Part 1 is dark comedy and not my opinion. I don’t want hate mail before you read the whole story.

 

Part 1: Dark Humor

I have noticed some interesting posts on my Facebook page recently. It seems people are eager to spread the word that COVID-19 is either a hoax or not that bad or the people dying from the virus would have died in a short time anyway. I also noticed on Facebook (and even in my office) people claiming they have a medical reason to not wear a mask. 

This is just stupid! Doctors have been wearing a mask for over 100 years when working with patients and when in surgery. To date, there is no record of any doctor passing out while wearing a mask. None! In the winter, folks here in NE Wisconsin (and other northern locales) bundle up with thick clothing all over their body and one or more layers covering their face. Then they venture outdoors and slog through snow, wind, ice and frigid temperatures. No more than 5% or so of the population ever passes out in any given week while doing this. The police simply come by and pry the dead bodies from the ground as they clear the roads and sidewalks. Acceptable losses.

Of course that isn’t true. Very few people have any issue with a mask during cold weather. Those that pass out or die don’t do so because of wearing a mask, but because of the cold weather and heavy clothing. And it is usually from a heart attack.

Perhaps people up nort (only folks from northern Wisconsin and Upper Michigan will know how to pronounce that correctly) are built of hardier stock. Warm weather year-round could be making southern people soft and ruining their lungs, preventing them from wearing a thin piece of cloth over their face. Manufacturers will need warning labels on shirts and undergarments similar to plastic bags. WARNING: RISK OF SUFFOCATION! DO NOT COVER FACE WITH THIS UNDERWEAR! The CDC needs to warn people to put their t-shirt on fast for health reasons.

The face mask is a real problem for the majority people, all whom struggle to breathe even with no facial covering. I understand. I once had a hair from my beard get in my mouth and I thought I wouldn’t make it. Witnesses said I was turning blue from lack of oxygen.

Enough about masks; they aren’t needed anyway because COVID isn’t killing all that many people in the first place. The government is padding the numbers to scare us and most people who die from COVID would die eventually anyway. (You read that right.) 

Let’s look at the facts; you know, statistics.

I’ve heard it so often on social media it must be true: COVID is just like the flu. Only old and sick people are dying from COVID, right? They were all going to die anyway. Right? So why the fuss. Who cares if some old guy 35 years old dies? Young people need to get out, party and have fun. They’ll be 35 soon enough so they need to get their partying in now! Those young people dying from COVID is fake news and a hoax anyway. Saw that on Twitter.

Talking about flu season, only 12,000 Americans die each year from the flu. A really bad year can be as high as 61,000, but that doesn’t happen more than once or twice a decade.

And you don’t worry about dying from the flu, do you? Do you wear a stinking mask just because some slim ball sneezes, do you? No you don’t! You are an adult and have your rights! Besides, NyQuil ™ makes you feel happy. 

So COVID isn’t that bad. It’s like a bad cold season. When was the last time you worried about dying from a cold? during the summer?

COVID only killed 174,165 Americans as I write this.  That isn’t that many. And don’t use that sorry line COVID did in 5-6 months what the flu does in a year. We all know the flu doesn’t do its damage in just a short period of time. Who ever heard of a summer cold? Thought so.

It really isn’t that many! I mean, think about it. I have to give up my God-given rights and wear a mask? and social distance? and wash my hands!!! I’m an American and have my rights! I don’t want any of that socialist stuff from Europe (well, actually pretty much everywhere, including the U.S. is socialist, but I digress). 

Now that we have that straight, that my rights are more important than your scaredy-cat facts, I propose a few more changes to our American lifestyle. If we can have a biker rally in Sturgis during a pandemic we can have a lot of other things, too. As Americans, we have our rights. 

First, we have to stop acting like wusses when a mere 3,000 Americans die in a terrorist attack. Taking off my shoes at the airport, along with the rest of the security check, is unacceptable to a man from a free country. And why should I pay for all that waste? And as long as we’re at it, the cockpit (the boys are giggling now) doesn’t need a bullet proof door. One terrorist attack and billions are spent. . .  of our money! Besides, what happens if the pilot and co-pilot have a heart attack at the same time? It’s possible! Go long enough and it is bound to happen. Just as many dead and broken people as 9/11. Insane! (FYI: Prior to 9/11 I secretly hoped a flight deck would go down so I could land a 737 the way a civilian with no fight experience does in the movies.)

We need to put death into perspective, too. Only 174,165 dead from COVID to date? More died in WWII than from COVID (so far); 291,557 American soldiers died in combat during the Big War. During the entire Vietnam War America only had a mere 47,434 battle deaths. And we started the nightly news back in the 1960s with the number of Americans who died in Vietnam each day. And there were protests! On college campuses! I don’t know what they were protesting for. Today Americans should be protesting for a re-institution of the draft so we can go back to Vietnam and finish the job. The military will also save money since Americans can now bring their own gun to work

As long as we are at it, there are a few more rights we have lost, my fellow Americans. Talking about gun rights, only 15,498 Americans were killed by firearm in 2018. Such a small number of dead Americans and we pass laws restricting firearms, a constitutional right! Heck, COVID kills that many in 10 days and we don’t bat an eyelash. Toughen up America. 

Here is another right we lost. The government, yes that insane group of left-wing liberals, passed laws requiring you to wear a seat belt. Can you believe that? Over half the people killed in auto accidents in 2017 were wearing their seat belt. Lot of good that did them. And the rest of us have to suffer with the constraints of a belt to hold us in our vehicle in case of an accident. That’s as bad as wearing a mask.

Here is the worst government intrusion of all on our rights: drinking and driving laws. In 2016, 37,461 people died in vehicle accidents. Only 10,497 involved alcohol! A week of COVID deaths at best!

For some reason the government has decided it was no longer okay to have one more for the road. Here you are, enjoying a pleasant evening out with friends, and a bored police officer pulls you over, delaying your return home. You get arrested for only having one drink. One! They put you in jail, waste the court’s time and fill the prison with your carcass. All over a measly drink! 

Now I know what some of you are thinking. People who drink and drive have more accidents, but you miss the whole point. The people who drink and drive are just fine, except for the people with impairment problems. These people were going to die sometime anyway.

I hear you. What about the children? Well, in 2016, we saw 1,233 children die in alcohol related auto accidents. But when you think about it, that is a really small number compared to COVID. I also bet you noticed all those young people out partying during the current pandemic. These people aren’t afraid of dying. The number of dead kids is a fraction of a percent of all kids in the country. A small price to pay for their freedom. Besides, some of them will die in Vietnam when we start the war back up.

Then there are. . . 

No. I can’t take it anymore. These arguments are insane alright. COVID deaths are too high and people are making excuses because they are either callus, ignorant, lazy or all of the above. Let’s turn the discussion to something more serious; something that will make the world and our life better.

Part 2: The Fuzzy Math of COVID-19

The statistics above are all true, only twisted in a way to distort the truth. This is prevalent on social media and even from trusted news sources. I included links for your review so you can find answers closest to the actual truth based on facts. 

The faulty logic used in our dark humor skit is more than a risk to our physical health; it is the same mindset that harms you financially. We actually have people who believe 1,000 or more dead Americans a day isn’t that bad. There are people who think it is okay to carry on as if nothing has changed because only old people suffer the consequences. They forgot their Hemingway: Do not ask for whom the bell tolls; it tolls for thee. (For exact quote use the link.) The clock keeps counting for all of us and since I see no old people saying, “I don’t care if young people do stuff that might kill me,” I assume today’s young people will want respectfully behavior from the future’s youth.

Except the young are not exempt! Some young people do get sick from COVID. Fortunately, many have few or mild symptoms. Yet, some younger people get very ill and even die from the infection. Worse, there seems to be long-term health issues in some young people. The medical community still doesn’t have answers to why this is. (The Economist, pgs. 65-6, August 22, 2020 print edition

If anyone really believes this faulty logic they would be demanding (and protesting) for the end of seat belt laws, drinking and driving laws and incarceration. But nobody actually protests these laws seriously because we know they do good things for all of us. These laws flatten the curve, so to speak. It is estimated that 14,955 people died in 2017 in auto accidents that would not have died had they been wearing a seat belt. 

Drinking and driving laws are even more advantageous. The 10,497 people who died in 2016 in alcohol related accidents doesn’t tell the whole story. I never heard the argument from young people that “only” 1,233 children died in alcohol related auto accident in 2016 and conclude drinking and driving is less risky for young people. We know that stiff laws on drinking and driving flattens the curve. 

Many social media arguments claim that anyone who dies with COVID is listed as dying from COVID. This isn’t true. Yes, it is possible some people who died in an auto accident with COVID were inadvertently included in the COVID statistics. The number, if there are any, would be extraordinarily low. Making such a claim is like arguing people who die in alcohol related auto accidents would have died from other reasons anyway. Who can say the guy that wrapped his car around the tree would not have died an hour later at home of a heart attack? It is a fallacious argument and should not be used for COVID or alcohol related auto accident deaths.

We could write a book of examples on the faulty logic used to downplay any medical situation. Tobacco companies have been doing it for decades and you are better than a tobacco company, I hope. Instead, we need to turn our attention to what matters in this journal: personal finance and taxes.

Part 2a: The Fuzzy Logic of Personal Finance

We see the faulty logic every day on social media and news outlets. The issues of faulty logic were quickly debunked in Part 2 above. Unfortunately, too many will be distracted from this message before they even read this far. That is too bad because the same faulty logic, carried into your personal life, will cause great financial harm.

The lesson should be simple: Spend less than you earn, invest in broad-based index funds and wait. You tell me how much less you will spend compared to your income and I’ll tell you your net worth at any point in the future within a few percentage points. Then insane illogic takes hold.

Like COVID, young people are less affected in the near term if they don’t heed the mantra above. And even if you do internalize spending less than you earn and investing the difference eventually, you need less money set aside each month to reach retirement or financial independence goals the younger you start. Waiting to start saving and investing is the crime! It’s a simple product of time, as in, the more time your money has to grow the more it does. Call it Keith’s Rule 34. 

Again, like COVID, young people feel invincible and spend to their desire rather than to common sense. Somewhere between youth and their 50th birthday they have a come to Jesus moment and realize the clock really is ticking and who keeps tolling that bell! Then the crazy logic used to start this post is tossed out the window because stupid doesn’t cut it anymore. 

And some never get the message. They don’t walk into my office much anymore since I’m not the kind of tax office you visit if you are 80 years old with a 30 year mortgage and working a job for the man at that ripe old age because you have debt and bills to pay. So much for the gold in the Golden Years. Long-time readers know I’m not a big fan of traveling, but I do like to get out of the house now and again. In retirement it would be nice to visit a few places, even if they are only a skip, hop and a jump away. If I’m working when I’m 80 it’s because I want to and doing the things I want to work at, not out of necessity.

You can delude yourself into believing it’s not that serious when you are young, but it is. Everyone has seen the chart where twin brothers take two investing paths. The first brother starts saving (and investing those savings) $2,000 per year at age 18 and stops when he reaches 24. His twin starts saving $2,000 per year at 24 and keeps at it until age 65. Both brothers end up with about the same amount of money. Only, the first brother invested a mere $14,000 while the second brother invested $80,000 of his earnings.

It is serious: COVID and starting yesterday to save and invest money. The stock market is on a tear after the initial COVID scare. There are people who hit it out of the park owning Apple, Facebook, Tesla and a few other stocks. What we don’t hear about is the people who got taken out behind the woodshed for a whooping. 

The faulty logic of COVID is, “I am young so it will not affect me, I can carry on a normal, I don’t have to wear a mask.” The faulty logic of the poor is, “I’m young and have plenty of time to start saving and investing, I can party and have fun while I’m young because I can, I don’t have to worry about my health because I’m young and healthy.” Notice the overlap?

Too bad a couple percent will not be so lucky. If you have your health you are already wealthy. Medical problems are expensive. Medical bills are more painful than the disease! And lost income due to health reasons is the financial double-whammy health issues can cause.

You will never get another chance to spend less than you earned today and invest the difference. Sure, you can start tomorrow, but today is lost as it bleeds into history. The only questions is: Will you keep buying into the faulty logic of COVID-19 and extending that faulty logic to your retirement and financial independence plans?

Only you can decide that.

 

More Wealth Building Resources

Worthy Financial offers a flat 5% on their investment. You can read my review here. 

Personal Capital is an incredible tool to manage all your investments in one place. You can watch your net worth grow as you reach toward financial independence and beyond. Did I mention Personal Capital is free?

Medi-Share is a low cost way to manage health care costs. As health insurance premiums continue to sky rocket, there is an alternative preserving the wealth of families all over America. Here is my review of Medi-Share and additional resources to bring health care under control in your household.

QuickBooks is a daily part of life in my office. Managing a business requires accurate books without wasting time. QuickBooks is an excellent tool for managing your business, rental properties, side hustle and personal finances.

cost segregation study can reduce taxes $100,000 for income property owners. Here is my review of how cost segregation studies work and how to get one yourself.

Fear is the most powerful weapon in war. Hitler deployed buzz bombs against London in an attempt to destroy resolve and heighten fear during World War II. It nearly worked, if not for the even greater resolve of the British people and their leader, Winston Churchill. 

Fear is such a powerful weapon that nations will go to great lengths in war to manipulate the news reaching the people. During World War I, only Spain had a reliable free press reporting the deadly flu ravaging troops and populations. No army wanted the world to know they were taking heavy causalities from what would later be called the Spanish Flu. Yet every nation, on the battlefield and at home, were taking a hard hit from the disease. The U.S. was particularly hard hit. But when the absence of daily news on the deadly flu was only to be found in Spain, it was felt it the virus originating there. The truth was far from it.

Today we are facing a similar, though less deadly, threat, and the disinformation machine is in high gear. This time the media seems to want fear cranked to the highest level.

 

Washing your hands with soapy water for 20 seconds or longer is the most effective way to prevent the spread of the flu virus, even better than hand sanitizers.

 

Since I have no formal medical training I will leave the medical advice to those qualified to give it. What I can do, as an accountant, is reveal the truth behind the never-ending statistics and how they have been manipulated to scare us at the highest level. COVID-19 is a serious health issue without a doubt. It spreads easy and fast with a heightened risk of death. These simple facts make it easy to scare people into clearing their savings account to stock up on toilet paper and other essentials. 

The level of fear has filled my email box from clients and readers worried about the state of affairs and how it will affect their finances. I have worked hard on social media to provide a steady voice in the whirlwind of conflicting data. It is time I issued a formalized response here to the elevated levels of fear people are experiencing and the risks people face with their investments and personal finances.

Understand, this post is not about specific advice: buy this, sell that. Rather, my goal is to help you control your emotions and control your response to fear mongering and market unrest. That is where real wealth creation finds a home. Buying the right investment does no good if you panic sell before value has been realized. Buying high to sell at a panic low is the surest path to poverty. With new feeds bloated with coronavirus articles it is easy to start thinking the world is about to end. I will show you below, nothing is further from the truth. This has happened before and we know how it ends. (SPOILER ALERT: It will pass and most people will be unharmed. Even the economic damage will be less than expected and will return to normal in a matter of time. It will later be determined that fear caused more damage than COVID-19 did.)

 

A Short History of Pandemics

Human history is filled with pandemics. Until modern times, diseases ran their course with little effective intervention from doctors. Illnesses ran their course and eventually died out. 

The common cold, flu and similar illnesses are also common throughout history. The 1918-19 Spanish Flu was a particularly nasty one. As many as 50 million people died. 

Things were different in 1918-19. World War I was coming to an end. Governments involved in The War to End All Wars kept the flu numbers a secret so as not to encourage the enemy or demoralize their soldiers in the field and the folks back home. Only the free press in Spain reported on the people getting sick and the number dying. That is why some thought it started in Spain, hence the Spanish Flu designation. (It didn’t. It probably started in northern China in 1917.) 

Pandemics of the past, even those from less than 100 years ago, had less economic impact than today. Supply chains now span the globe. Never before have businesses been so integrated and international in scope. Pandemics of the past killed and sickened people; COVID-19 is also wrecking havoc on the world economy.

Until recently, a nasty flu season was the only way anyone knew something was afoot. Modern medicine gives us a jump start on what to expect. We knew COVID-19 was headed our way because China alerted the world to the pending virus. SARS, the Swine Flu and the H1N1 variety of flu in 2009 are modern examples of pandemic scares. Most of these viruses never circumnavigated the globe, dying somewhere along the way.

And we come back to the Spanish Flu. Somewhere between 20 – 50 million people died from that flu. It came in three waves with the second being the worst. Then it just disappeared. Nobody knows exactly what happened, but the flu virus probably mutated again to a less deadly form. Doctors didn’t discover a cure, social distancing wasn’t a thing and unless you were sick in a hospital it was unlikely you were even quarantined.

The Spanish Flu did have one nasty trait that put it into the history books. Normally the seasonal flu kills the old, very young and those with a compromised immune system. The Spanish Flu killed adults in their prime; the people who usually get sick for a week or so at worst during flu season, but almost always recover. 

And that is the first problem with the fear surrounding COVID-19: it generally kills older people, similar to the normal seasonal flu. The very young are spared with only a few healthy adults susceptible. Those over age 60 are at most risk.

 

Unfounded Fears?

COVID-19 is a nasty flu bug for sure. It spreads very easy and has managed to circle the globe rather quickly. It also makes people very sick that normally only get mildly sick from the flu. Older people face a very high risk of death if they contract COVID-19.

The fears are not unfounded, but are exaggerated. The response has been way overblown compared to the risk profile of the disease. Let’s place this into perspective:

As of this writing, 7,158 have died with COVID-19. Read that last sentence very closely as it will be important in a bit. Here are the current numbers

No one is advocating clearing the roads due to the risks of driving. Many still smoke tobacco and eat an unhealthy diet that increases the risk of cancer, heart disease and stroke. Yet, one of the smallest risks of dying to-date is causing a panic.

HIV/AIDS caused fear, but no panic. All the mortality risks listed above are a concern, but not at a level that should be disruptive. So what is causing COVID-19 to create such disruptive panic?

First, when the seasonal flu is with us every year and tens of thousand die from it we adjust to the risk as a normal part of life. COVID-19 is new, novel. Novel in this case means people do not have a natural immunity to the virus yet. 

Second, COVID-19 spreads fast and very easy. People have not had time to adjust.

Third, people who normally do not die from the flu are. Not like the Spanish Flu, but an elevated percentage of healthy middle age people are dying from COVID-19. 

All three combined has caused rampant fear. New, fast and potentially deadly to people who normally do not fear the flu has generated panic. Then people extrapolate the numbers to the entire world population and get dizzy. Except it is a massive misrepresentation of the facts.

 

Misleading Numbers

News reports and press releases from world health organizations are very careful how they word their press releases. Mortality rates are extrapolated by the public from the fancy representation of the numbers, but the extrapolations are far from truth. 

People dying with COVID-19 are reportedly as high as 3.84%. When people read this they think it is the mortality rate. It isn’t.

Not everyone is tested for the virus. Those most ill are more likely to be tested and all people who are reported to have died with COVOD-19 have been tested. (Otherwise how would they know they died with the virus?) This leads to a misrepresentation. If only sick, or potentially sick, people are tested, the number that die from the virus is pulled from a population likely to have contracted the disease. That is like using a test from people likely to have cancer as a representation of the entire population’s cancer mortality risk. The mortality rate for COVID-19 is likely under 1% and even lower for the population at large. Only time will give us an exact, or close to exact, number. Using the data available, COVID-19 is more deadly that the seasonal flu most years, but not anywhere near as deadly as the Spanish Flu.

Another misleading statistic comes from the wording in news reports and press releases from health organizations. They are careful to say someone has died “with” COVID-19 rather than “from” or “because of” COVID-19. This is a serious reporting issue.

Think of it this way. If someone is healthy and contracts COVID-19 they might have mild or no symptoms. But if they die in a car accident before the virus is cleared from their body they died “with” COVID-19. The virus had nothing to do with the death, but is recorded as a disease that the person had when they died. 

It is not uncommon for someone to have several contributing factors to their death. Rarely, if ever, do we medically say someone dies of old age. Instead, we list a variety of ailments that contribute to the final cause of death. Cancer and pneumonia  are common causes of death in people over 80. The flu is also a big contributor. Somehow we can’t bring ourselves to say they just got old and died. We need a reason. And that can lead to problems at times like these.

This counting of every death where COVID-19 is present misrepresents the full facts. The patient may have died from other causes at the same relative time anyway. This happens when people get old, and COVID-19 strikes hard at the old, as do many flu strains. This misrepresentation allows for an inflation of the COVID-19 numbers which heightens public fears.

 

Emotions in Check

People at risk need to take precautions. Because young people can carry COVID-19 without getting seriously ill, it is important to take steps to prevent the virus from infecting older family members inadvertently. That is the real risk with COVID-19; the unknown causing fear.

It is proper to take a break from all but necessary gatherings. The economy will take a short-term hit. It is scary, but not as bad as the media would have us believe. Social media blows it up even worse that the traditional press. Shame on us!

In the modern world this means supply chains will be disrupted. Business will slow and some industries will be very hard hit. The stock market is predicting a doomsday scenario.  It isn’t that bad! For those who are patient and control their emotions, now and in the near future is a good time to increase equity holdings. Keep adding to your retirement plan at work. Dollar cost averaging only works if you keep the regular investments going when the market is down, too.

I know it looks bad right now. Not everyone will contract COVID-19. Most who do will only experience mild illness. The older you are the more important it is to seek medical attention as your mortality risk increases rapidly with age. 

The way the numbers are playing out the number of deaths from COVID-19 will be somewhat higher than a normal flu season. However, the fear it induces will keep more people at home and off the road. It is possible the fewer number of people who die in road accidents as a result may be more than all the deaths attributable to COVID-19. 

That would make this the first flu strain to reduce the number of deaths by a greater number from other causes than those who die from the virus. Technically, a negative death rate. Again, technically, all factors combined, it could be the least deadly flu strain since the invention of the automobile.

It’s all a matter of perspective.

 


 

 

More Wealth Building Resources

Personal Capital is an incredible tool to manage all your investments in one place. You can watch your net worth grow as you reach toward financial independence and beyond. Did I mention Personal Capital is free?

Side Hustle Selling tradelines yields a high return compared to time invested, as much as $1,000 per hour. The tradeline company I use is Tradeline Supply Company. Let Darren know you are from The Wealthy Accountant. Call 888-844-8910, email Darren@TradelineSupply.com or read my review.

Medi-Share is a low cost way to manage health care costs. As health insurance premiums continue to sky rocket, there is an alternative preserving the wealth of families all over America. Here is my review of Medi-Share and additional resources to bring health care under control in your household.

QuickBooks is a daily part of life in my office. Managing a business requires accurate books without wasting time. QuickBooks is an excellent tool for managing your business, rental properties, side hustle and personal finances.

cost segregation study can reduce taxes $100,000 for income property owners. Here is my review of how cost segregation studies work and how to get one yourself.

Worthy Financial offers a flat 5% on their investment. You can read my review here.